Retirement Mistakes

February 14, 2008 12:00:00 AM PST
Some people dream of becoming millionaires, but how many of us could ever fathom losing a million dollars?As an independent financial adviser, Rob Freireich finds himself constantly reminding clients how expensive it is to retire.

"People believe that they're saving enough for retirement, when in fact what happens is that nest egg can easily be eaten away by things like inflation and a greater life expectancy," says Freireich.

If you don't have the luxury of working with a good financial planner, one of the most important things you can do while you're young is invest aggressively.

In fact, according to Consumer Reports, investing too conservatively for retirement is one of the bigger financial mistakes people make.

Greg Daugherty, Consumer Reports, says "If you invest half a million dollars in bonds, versus stocks, over a 20 to 35 year period, you could lose about three-quarters of a million dollars."

And there are plenty of other ways you could miss out on big bucks. Consumer Reports money lab, using hypothetical profiles, came up with 12 money mistakes that could cost you a million dollars.

Planning to retire early? That could cost you as much as $309,000. Strike a bad deal on your 30-year mortgage and you could end up overpaying your mortgage by $27,000. Carry a balance on credit cards? That can run up almost $25,000 in interest.

"The list goes on and on. One thing a lot of people may not think about is simply taking better care of themselves. For example, a 40-year-old man who smokes will pay about $42,000 more in life insurance premiums than one who doesn't smoke. And that doesn't include all the extra medical costs," says Daugherty.

Another money-losing pitfall is cashing out money from your retirement account unless you have absolutely no other choice.

"Regardless of how much money you make, I think everybody should reassess their finances once a year. There are always places where people can save money," says Freireich.


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